Ericsson takes hit in Q4; North America slows

Ericsson takes hit in Q4; North America slows

27 JAN 2015
Ericsson

Swedish network vendor Ericsson reported weaker-than-forecast profit and sales in the fourth quarter, as operators in North America curbed their spending.

The world’s largest mobile infrastructure company reported Q4 profit of SEK4.2 billion ($510 million), a 35 per cent decline on a year ago (albeit the Q4 2013 figure was boosted by a one-time gain from a licensing agreement with Samsung). The latest figure was below analysts’ forecast of a median SEK4.56 billion.

Sales dipped slightly (2 per cent) to SEK68 billion (adjusted for comparable units and currency); analysts had forecast SEK70 billion.

Ericsson cited North America as a market that continues to decline for the vendor, with sales in the region falling 5 per cent in the October to December quarter.

“Sales in North America were mainly driven by operator investments in capacity and quality enhancements also this quarter, although at a slower pace,” noted CEO Hans Vestberg. “Business activity slowed further in the quarter as operators remained focused on cash flow optimisation in order to finance major acquisitions and spectrum auctions.

“Consumer demand and mobile data traffic growth continues to be strong in North America. However, with current visibility, and for the reasons above, we anticipate the North American mobile broadband business to remain slow in the short-term.”

Vestberg was more confident for growth in the Middle East, Europe and Asia (particularly China, Taiwan, Japan and India).

He was keen to point out that the company’s mobile broadband sales increased both year-on-year and quarter-on-quarter as it delivered on previously announced contracts.

However, total revenue at its networks unit, which accounts for just over half of its sales, fell 7 percent on a like-for-like basis.

For the full-year 2014 total sales remained flat at SEK228 billion, with net income down slightly from SEK12.2 billion in 2013 to SEK11.1 billion.

The Ericsson CEO stressed that the company continues “to proactively identify efficiency opportunities in the company,” noting that plans announced in November to achieve savings of SEK9 billion by 2017 are “progressing.”

Vestberg also reiterated the company’s ambitions to grow beyond traditional network infrastructure. “In line with our strategy, we have invested into our targeted areas; IP networks, Cloud, TV & Media, Industry & Society and OSS & BSS,” he stated. “Sales in targeted areas showed a growth of more than 10 per cent in 2014.”

The vendor ended 2014 with net cash of SEK27.6 billion, down from SEK37.8 billion in 2013. However, it plans to pay a dividend for 2014 of SEK3.40 per share, an increase of 13 per cent from the year earlier.

Ericsson shares were down 2.6 percent by 0815 GMT. Until Monday’s close its shares had risen 9 percent so far this year after rising 20 percent in 2014.

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Justin Springham

Justin manages the editorial content for the Mobile World Live portal and award-winning Mobile World Live TV service. In the last few years Justin has launched and grown a portfolio of premier media products, which include the Mobile World Congress...

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